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Working With a Turnaround Expert to Save Your Business

If you're prepared to listen and take a consultant's advice, you can save your ailing business.

Turnaround consultants have a tough time getting their clients to talk about them. When they are attempting to save a troubled business, the owner is usually too upset to discuss their efforts. After the crisis, when the business is back on track, the business owner just wants to forget that he or she almost lost everything. "It's one thing to run a company when things are going well," said Joel Getzler, president of Getzler & Co., a Manhattan, New York, turnaround company. "It takes a totally different mind-set when things aren't going well."

Things aren't going well for thousands of small companies around the country. Forget the dotcom disasters; many traditional businesses, especially in the apparel and textile industry, are failing-but the smart owners are reaching out for professional help.

Getzler said an entrepreneur's unsinkable optimism actually hurts his or her chances for saving a troubled business. "They say, 'It will get better tomorrow...the big order is coming tomorrow,'" said Getzler. "The exact thing [optimism] that got them to where they are starts hurting the business when there is a problem."

Business owners don't suddenly become stupid, but too often they ignore how the economy or overall market conditions are negatively affecting their businesses. No matter what kind of business you operate, here are three things Getzler recommends doing right now:

1. Prepare a short-term cash projection. Estimate your cash needs for the next two to three months to set your spending priorities. Identify ways to reduce expenses.

2. Prioritize payments. Determine who your crucial vendors are-the ones you can't operate without. If you owe vendors who aren't currently providing supplies, hold off or reduce those monthly payments.

3. Review staffing levels. Ask yourself, "Does this person really contribute to my business?" If not, let them go.

Getzler, whose father, Abe, started the business in 1968, said the firm has been extremely busy in the past three months as the economy has weakened. (The week we spoke, he received nine referrals.) Most of the time, Getzler & Co. is in and out of a business within a few months, dealing with creditors and sorting out a variety of problems. "Our goal is to work ourselves out of a job," said Getzler, adding that his firm is usually brought in by the business owner's bank or board of directors. "Generally, something happens that triggers the bank to get nervous and they tell the company, 'You have to hire someone we trust.'"

A reputable turnaround consultant will do everything from negotiating payment plans with your creditors and suppliers to firing employees. They charge hundreds of dollars an hour and require payment upfront. If you hire a professional turnaround consultant, be prepared to take their advice and do exactly what they recommend. Choose someone you trust and feel comfortable communicating with. The turnaround process can be long and painful, especially if you've spent years building a successful business. "The toughest part of my job is to get the company to go along with what we recommend," said Getzler. "Most of the time, we come to some sort of agreement on what should be done. But sometimes we'll resign if the owner has no interest in fixing things."

Firing people is usually the quickest way to cut overhead costs. Although business owners hate to lose valuable employees, Getzler said finding new talent is easy if you can save the business. "I'd rather have the problem of finding new people [to hire] than running out of cash and dying," he said.

If you are suffering a cash-flow crunch, consider some alternatives to prayer. One way to increase your cash flow is to work with an accounts receivable lender. Unlike banks, which base a loan on your collateral and credit history, an accounts receivable lender advances you the cash based on the invoices you have outstanding. This kind of lender pays you a portion of what's owed you, charging a fee based on the total amount financed. (The fee ranges from 3 to 5 percent in most cases.)

"I provide an interim solution," said Rebecca Karp, founder of JayBeck Business Funding in Holtsville, New York. "It's more expensive than getting a bank loan, sort of like using a credit card. I personally fund smaller, local businesses because I like the rapport and connection with the business owner."

One of Karp's clients has a successful home health-care agency. Although he had solid contracts for nursing services, he wasn't paid quick enough to meet payroll twice a month. So he sold his receivables to Karp, who felt confident she would be paid back because the insurance companies he was dealing with would eventually pay the bills. Karp, a former bank executive with 25 years' experience, said the money she lends to business owners comes from private investors as well as her own funds. "This type of financing works for any type of business, staffing agencies, manufacturing, food service," she said.

Another alternative, which can help you weather a downturn, is to apply for a commercial credit line. But the time to apply for a commercial credit line is long before you need it. If things are going south fast, you may need the services of a liquidator.

Jonathan Reich, a bankruptcy attorney, works for Michael Fox International, a Baltimore-based liquidation firm with offices in New York. His firm does appraisals and liquidation and auctioning of assets, typically machinery, equipment, real estate and inventory. He said many business owners don't know how to maximize the sale of their assets when their business is in trouble. Often the bank insists on an appraisal of assets long before the business owner will call his firm for help, Reich said, adding that a professional appraisal can cost $5,000 to $20,000 or more depending on the size of the company.

"The appraisal report is used extensively as testimony [in a bankruptcy hearing]," said Reich. "The debtor tries to show the bank is over-secured; the bank takes the opposite view." He said if your business is having financial problems, you have to persuade the bank why they shouldn't pull the plug on your loan.

"I can often help the owner buy more time with the bank," said Reich. "But if they owe the bank $10 million and they are worth $2 million, they should sell right away. We can often help find them a merger partner and sell the [company] as a going concern."


Jane Applegate is a syndicated columnist and the author of201 Great Ideas for Your Small Business. For a free copy of her "Business Owner's Check Up," send your name and address to Check Up, P.O. Box 768, Pelham NY 10803 or e-mail it to info@sbtv.com.

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